SOHO - Earnings call transcript Q2 2019

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Operator

Good day, and welcome to the Sotherly Hotels Second Quarter 2019 Earnings Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Mr. Operations Relations. President, Vice Kucinski, and Investor Scott Please go ahead.

Scott Kucinski

strategic call everyone. Sotherly webcast. activities Hotels’ you, begin Folsom, and quarter and to morning, good today’s will COO, and key update CEO, our performance. Drew XXXX Thank objectives. portfolio a second review our Sims, Domalski, company’s on Welcome earnings will the for our CFO, our results Tony President and conclude and guidance. review of an with to quarter the our provide our Chairman will financial and quarterly Dave review call

take We questions. will then

If of constitute at with most GAAP measure statements. may sotherlyhotels.com. Any you G may received this financial has you’ve website release, directly access comparable conference requirements. which call, the non-GAAP not the company not the a the earnings are Reg historical, statements to accordance In our in made reconciled copy it during on forward-looking all release, measures

forward-looking we Although are will we believe statements these give assurance be reasonable can on attained. expectations based that the expeditions no reflected in any assumptions,

differ and to cause company’s undertake and detailed SEC. company time today’s release that from those by duty can statements, any actual update does in press results or filings are any in to statements. time, forward-looking with risks the to from forward-looking revise expressed the Factors not implied The materially or

the to Dave. turn over I’ll call that, With

Dave Folsom

of a Scott. start portfolio’s Good with today’s review operating our you, metrics Thank morning, I’ll the everyone. key call in quarter. off

& composite hotel from wholly-owned and condominium properties for rooms results company’s the Resort Hyde the at which portfolio, the represents Looking the participating Residences.

in ADR. and reflecting X% over a a portfolio X% RevPAR X.X% year prior the in increased to quarter, increase $XXX.XX, occupancy increase For

compared to With over growth increase for lodging our in U.S. RevPAR sets the prior to competitive a ADR. a X.X% market is and the the quarter, $XXX.XX, portfolio X.X% Year-to-date, industry RevPAR X.X% RevPAR increase industry. X.X% in RevPAR Year-to-date, X.X% in up our flat U.S. at lodging with increased occupancy markets of X.X%. with the in year X.X% underperformed for relatively for

favorably the portfolio years. given metrics performing efforts is over Our past compared executed these few the to repositioning

validating at the property a and a an grew increase quarter, our concept Wilmington, the in occupancy, XX.X% Carolina, grew quarter, the year. in RevPAR XX.X% impressive fair quarter increase strategy repositioning with XX% in to North RevPAR property in convert taking by in property a to the in in some Looking boutique our Hotel percentage Market driven XX% individual highlights points share. Ballast ADR X.X last

property XX% quarter. increased quarter, RevPAR with ADR. in X.X% by our market share fair The Airport taking during a the fueled in DoubleTree percentage an X.X% The the X.X Philadelphia grew property points increase healthy in

by Market the the X.X% fueled X% taking our ADR. Hyatt X% hotel Centric in continued decreased its RevPAR increasing quarter, Lastly, X.X% stellar in the to in during market RevPAR leader. increase remain with the in performance Arlington, a with share quarter

elements moving to other that approximate inspired, positioned concept; to In local this and Buffalo beverage with hospitality the flair along forward. food and art Tampa, exhibit renovation reimaged a College believe, key of Spaniard, $XX.X similar and touches is locally now Art from property property Bayou entire Alba. new, June, conversion Coffee, Savannah curated the our to southern conversions. million Hotel Design; outperform Sotherly market chef-driven include completed renovation of Florida Plaza Crown The with the the our we and We

were an series and to purchase capital. for due D preferred used proceeds of of million, in XXX,XXX exercise to partnership’s sale In of April, cumulative the issuance net preferred issuance additional X.XX% closed of the company the company shares in proceeds million. total and Series for closed its the notes of and the redeem $X $XX this stock the X,XXX,XXX redeemable In with shares. connection working of sale stock of option in XXXX the full unsecured for of gross shares underwriters’ X.XX% partial The operating proceeds senior additional May,

during the with million addition, the Third April, company amended Tampa, Florida lender, by secured our existing $XX original its we In Bank. announced asset Fifth mortgage

property the million LIBOR, principal one-year a amount XX-year reducing The the XX-day the will schedule. performance remains loan X.XX%, The term plus mortgage’s amortizes LIBOR achieves With interest plus equal extensions. amendment, XX-day a plus at hurdles. if loan’s LIBOR three-year to rate X.XX% new $XX.X approximately with two on the certain remain

per of Finally, last $X.XX an month, of based annualized yield share announced yesterday’s we a dividend a representing on quarterly X.X% $X.XX of share, with per dividend close.

over turn Tony our it With that, Domalski, CFO. I’ll to

Tony Domalski

for Dave. a you, revenue Reviewing June XX, approximately Total of representing $XX,XXX $XX.X the was a the same XXXX. ended million, performance quarter year Thank for decrease over X.XX% quarter ago. period or the

million, the $XX.X approximately prior months, X.X% For first the six an revenue representing period. was total increase over of

representing year first X.X% the decrease a X.X% approximately a quarter For was over representing And of million, months, was EBITDA increase the million, $XX.X the an prior for period. ago. EBITDA of same hotel hotel $XX.X quarter, over the six approximately

$X.X For a quarter, quarter over million, same the year a adjusted of XX.X% the FFO representing decrease ago. was approximately

over best stellar six prior decrease the in history, attributed of that the is Company’s second first also the FFO included was onetime For in the quarter representing to XXXX, million, approximately a FFO period. gains. adjusted decrease X.X% adjusted some $XX the months, of The

EBITDA as our tax Hotel extinguishment on abandoned the gains well securities Please refer tax other Please expenses, derivative of portion the as provision early note and our to some interest related charges the well earnings administrative of our detail. for these changes or aborted items. to current offerings, and portion expense, release to and general our other income, adjusted that related losses interest corporate deferred income as to excludes additional charges debt, as items. charges income instruments, excludes provision FFO of

Looking at our balance sheet.

had which cash consisting includes approximately real of investment net improvements capital of hotel million, well million. and approximately million, was the XX, properties and June approximately $XXX.X cash The of expenses. XXXX, equivalents certain million assets value as of our other of unrestricted as As total book taxes, in total company was of reserved $XX.X $X.X estate $XX.X cash which million, approximately approximately for $XXX.X

the the quarter, Company’s of a outstanding debt balances average rate carries the a approximately $XXX.X in company equity debt XX% of of million had at of rate million. unitholder unitholder’s principal of quarter, had and weighted $X.X Total a and end was interest. of the interest equity of $XXX.X deficit million stockholder As the of at Approximately of the stockholder million fixed approximately end was approximately which equity approximately $XXX.X X.XX%.

the approximately outstanding, ESOP. shares also are approximately XXX,XXX At owned which limited quarter, our principal of the the units end common room. $XXX,XXX bearing on partnership end the XX.X of by the quarter, approximately At balance interest are the were also There million debt per million second of was outstanding. there X.X approximately

guidance. to Turning

reiterating performance which and as current expected accounts our factors. guidance other our are XXXX, as for portfolio for within well We

the $XXX.X midpoint year, the $XXX.X X.X% At million represents of range, in the of to year’s a For we’re projecting the total increase this million. revenue revenue. total last range over

And range, midpoint and in increase to FFO share. $X.XX last the X.X% increase to year’s $X.XX a projected $XX.X million per range midpoint $XX.X the million, at [indiscernible] the to or is EBITDA is of million hotel represents of $XX.X represents last per over lastly, this a EBITDA. the $XX.X in share. year’s adjusted range of over million the FFO range, of adjusted At projected this the Hotel

Additional be details release. earnings on the section Outlook can our found of

And I will to turn Drew. call over the

Drew Sims

rate driven It’s industry, to second second that growth. a relatively to results the with muted quarter holiday the with were Thank impact From of we the results causing on majority negative year-over-year from you, March quarter. perspective, for and Easter to outpacing primarily are Tony. by the revenue pleased due a note important our portfolio the top markets line the shift April, the

of for the paints remain of industry markets an the our result, combined increase performance, regarding a accurate which with state balance of cautious We for from this X.X% believe half growth of year Company’s in healthy results of most estate. of minimal a picture anticipated more the the As the year. with RevPAR we first analysis the a the the the

quarter of an insurance to XXXX, fee Bottom to asset impact shift items the are approximately our second In payment construction line XXXX, asset in results a Neither comparison. of a $XXX,XXX fair neighboring to bit of there these a Hollywood XXXX. related booked to $XXX,XXX the non-recurring the but need for addition of booked Also quarter related holiday casualty. on items recur our an Houston were concluded development. a second basis, year-over-year be the that lackluster approximately in in electrical of

set competitive ongoing. Florida we Beach construction Resort of a significant Unfortunately, at in House The are had and occupancy has has DoubleTree has negative resulted cooling been performance. on Hollywood, the in of portfolio in Resort impact underperforming growth a our the South Hyde market while

the we believe in of will track get year, to slated the the quarter to on this this we impact shortly completion back lessen, hope With project thereafter. and occur of third

renovation we are the rave experience four product the property, period quarter disruption impactful Brand this In guest an Hotel to driving received successfully the from June, the and for years improvements reviews relaunched beginning and customers. of part first that in hotel conversions company. are superior portfolio, important project conversion were our this in as the Collection. Hilton’s to Tapestry results Tampa Alba, result. marks a extended always the second which of completed as that the of over the for our Significant down a the significant completion It’s note across has of without

in generally at healthy see rate X.X% a unemployment. ahead, economy country growth the slowed Looking be annual to has we and spending whole, the as with helpful experiencing low as is a although strong consumer industry the reasons growing

to pricing value-creation We we focus for to act the conservative we’ll right when is terms on believe identifying most if still fit. and continue and opportunities remain our we in shareholders, underwriting, our acquisition find long-term overheated as in and steadfast of opportunities approach market the cases. monitor to We

short-term managing our diligently refinancing Company’s balance activity, are the as the addressed recent evidenced maturity. only We sheet which by

up need now questions. that, questions. for the open open Operator, we With to for up I’ll call

Operator

now Good my Instructions] We’ll Sorry, I session. first Janney Batory The microphone had Markets. morning. Capital go of comes trouble question-and-answer question get [Operator Tyler the ahead. begin from Please open.

Tyler Batory

Thank Good you. morning.

couple Just from questions of me. a

versus property? your and progressing talk about guys Can little you start the how ask to that Ballast. wanted Hotel I about that a expectations? First, ramp is of And bit

Drew Sims

growth come We’ve been year, It’s the number, has strong, market good. exceeded which terms has year. a that a of month Scott, every our exceeded in for didn’t you of The welcome and anticipate. the very budget have surprise. be beginning if each will back expectations which this this we

Scott Kucinski

XX% a quarter.

Drew Sims

Yes.

of to market that the we in to guest Embassy And quarter, rooms market the the business. of convention Suites state addition of was take XX%. inventory now to is the much For center. association And care available attribute up there’s a a married larger new that the

we hurricanes have group were So reopen. and that up Carolina increased were has couple in several yet damaged Michael Eastern think other a they of the last in City, component that Beach by Morehead Atlantic Also, incident hotels in and to year’s North properties, there significantly.

that lot into of – which has these So and transferred in occupancy business incredible driven increases a RevPAR. got market, really market our was

Tyler Batory

And You’re I That’s it. what you less. the having and Alba, more be things the over expected, you’ve in helpful. guests. disruption How been got about has quarter comment Okay, Hotel mentioned Any there wanted helpful. also received against progressing conversion expectations? will about there or then your by that your well some to are ask

Drew Sims

to anytime Tyler, to mean, it have you time. go takes Yes. you yourself switch and reestablish – brands, you online I have

two, what get we we was for your rate lot probably – to you period. your and providers of OTAs with group loaded up takes to so to four-week that, be make control you anticipation We less a a And beholden ultimately. we time the levers the a of other us going. all that’s of wanted little it a that there hotel to answer maintain lot But three, don’t there’s service franchisor to than your online. what So at things visibility and in did sure question, the usually are just we

your going you. that Hilton, going at you knew window from because visibility disappears period to change your where and business you’re we our just – because IHG you when you there lose transient be a But fall lose was off guest booking you time on to and there’s

a sudden, the So nothing just couple of all of segment almost goes situation got a weeks. for your where transient you’ve

we and hotel group, the well. So fill doing with it’s

show to going it’s fall, this that hopeful really results. We’re strong really

another, one to brand you’ve that we’ve join opening seen seen been Hilton in a or even or really I for Hilton, or and done, think our we’ve superior. IHG come it’s fabulous. that Wilmington in we’re September about product us. great good to and – to within switched, you I increases. us The It is because where just we grand I instance, absolutely is other Jacksonville it’d either down product like for talking markets from Raleigh for think hope

Tyler Batory

then And quarters, helpful. Okay, of generally? great. had are address on goes? And as some that’s construction Hollywood. know far in of I we a just trends about of guys going Florida, in you also remarks. more in prepared I past as appreciate the couple been Can you disruption South control and out disruption where then bit I the have your some whatnot. the wanted terms That’s what’s of to you Can comments ask with elaborate about are little that

Drew Sims

Yes, sure.

here. So I two mean, issues you’ve got

amount as new a the the is We’ve There’s in a move new been that construction activity all going public in added, little which Barrier lot Related product had Island of part with submarket. is fair of area, condominium us the Hollywood that’s we hotel. near Island. the a of in market, that or Group, forward the the we partnership two the that’s product And Barrier involved got acquire You’ve on on to added door in, this then space bit. in are – the that next especially to suffering

building they’re hotel. feet building XX the So XX-story less than backdoor from our of a

us, are construction. up here. a in it that things all competitors the want against It’s say why expect go as and to where So to related that’s you group activity. put they always is would especially segment disruptive the using our construction there would you the all and been result, high-rise And with

We are just about past that.

exterior the off. the We finished. are outside all now. It’s up cleaned mean is topped past I of landscape building that. the It’s

to quarter get so is It’s it. going and regain probably the our back behind to all at us worst a us. And footing take

down. were market and the So outperforming the before happened, this whereas we market market’s the underperforming now we’re

here now shapes Hollywood once to that is we confident downward So significant you’ve be other performer a Long-term, asset. trend fairly solid got parts creates absolutely market the a for this that some that long-term. are going everything out,

countries reason American think this year, that I for of downturn the market especially to not the is time the we’re South the travel travel. seeing market, just this

Resort, year. just the this asset, Argentina, So there’s Peru. the the hotel, Those those this that that, travel are with Brazil, condominium are the countries countries the seeing support Hyde we’re not especially and

more is one got deepest Miami the in you’ve of We to know that? will the add things hotel you markets get So world. put largest, any Dave, to situation. the a that eventually, to comments want these stable back

Dave Folsom

No.

it. covered You’ve

Tyler Batory

Last for here. me question

having the respect What labor other to cost you of and increases. Some with labor cost are with model? are in your peers increases and costs guys business seeing other issues

Drew Sims

about the increases. been. than I significant do trend mean of seen stay Well, the to less we the of Southlands it where one of increase, benefits in we’ve little haven’t is But the any a here being other cost in terms is places. seen business has

labor been has our that’s trend seeing about and to increase X% in year. expense X% this Our we’re total what in

Tony Domalski

market Tony. different will – is We workers. hotels This there’s supply increase some hotel market. where just are for I huge lot it’s there’s demand to markets a There more add. where of see been from of

effect any those are don’t in those And see tightening markets and stable. on see markets We very markets. in increases so other we wage

Tyler Batory

you. Okay, all for great. Thank That’s me.

Operator

comes ahead. next from O’Neill. question Please The Sandler go with Alexander Goldfarb

Alexander Goldfarb

Hey, Thanks for taking good morning. questions. the

back previous the going just First, analyst. to

obviously who people are – that And hotels stay closed year Easter, that in is an questions are or quarter. while I competitor travel. quarter quarter on bunch much Easter would actually? think one versus who How because second the that assume year? this falling for of how benefited Ballast One, there then two, families the hurricane. much there you two I the would from the mentioned impact Just that of home you had were travel, last second at Easter you

could next this So does are where about reopened Ballast talk those that impacted gets just then the because and mean hotels if reverse specials? a maybe I you a two year, of second So question. have maybe those offering there’s and now

Drew Sims

Okay.

part of help Alex. your the question So – me, first

gave so… me You two quick, real questions

Alexander Goldfarb

I sorry, I sorry. mean, of there Easter, a families… sorry, On understand I’m lot

Drew Sims

Easter. Oh $X.X quarter Every about moves in from year, of other to it terms Easter, hotel our one EBITDA. Oh, analysis. million the That’s

We have a book we’re holiday People around – big group don’t group house. the events period.

of So about $X.X for it’s negative a negative a falls, Easter Wherever that’s million. us.

to for to going XX And Ballast. have and the go huge don’t lot we week Beach of think back Atlantic In never should the there, folks at a so. said I they they’re last I expect over over group been better. market those We Wilmington down? had years, just but like last going terms the a

– a So to that actually getting very, before. hadn’t been a a – I very lot it’s And new has folks our show this well chance received. been think it’s to we’re product seen it of

Embassy think its the hereto but a place. enough in folks a to hotel seem hitting for, It’s because be strides but things not rooms center was downtown, before small market. there support – hotel where major Charleston, a convention rooms association Suites to in the a meeting. beautiful all attractive and there hotel, is a product like sudden, enough I a point there it’s very, maturing the support not It’s weren’t love convention very of Wilmington coming no to downtown was enough there, opened, of market to So and

been that’s solved, now So I think.

Alexander Goldfarb

question. Okay. And the second then

But come it what sounds sounds in Ballast do better? it for to guys second guidance, And items be I tourists. maintained will short of gives Hopefully, about is FFO still Hollywood quarter Alba you a guidance mean way, what the second that half Latin because like like they’ll $X.XX. your you right nothing There’s year. in that the like confidence mentioned. $X.XX maintain it can quarter second Just bit your was a Obviously, ramp-up looking the at your seems back. trending are the is. it you the big and but to you

achieving how – far and can versus we portfolio for Ballast the the much how in the a about half? guidance So Alba, breakout Hyde as Resort as core think from back contributions the

Drew Sims

we say back the good of I didn’t Well, last half have year, a year. would particularly

So we’ve a pretty got easy comparable.

exceed have can didn’t from think we’re baseline we are other if a that. starting playing that additional So into we we that even factors any

– same well did day, we reassessment budgeting. process, the we – We midyear make through hotel on range. GMs have basically single end to to we’re the within that think in starting of every the be every get and involved go guidance on the And our re-forecasted very at the process. We a our we queue hotel,

That’s of went we that’s process So we kind where through. are. the

We have far – good we’ve so seen this quarter, results. fairly

optimistic fairly we’re So about that.

Alexander Goldfarb

Okay.

think you benefit we the the from the a not there’s core now are can can’t really versus that about that a if not online? – like projects incremental So you there’s – from incremental, the quantify

Drew Sims

property-by-property provide basis, a I you we that. information, that could after that. and Maybe can reach to if to we couldn’t On out do do we’ll try

Scott Kucinski

for Scott. to Savannah, year in the are an over back They’re a on Hotel year for Houston That’s this is prior having be and the They Hotel a great half Ballast, year. The having are biggest win ton versus Minnesota but Alex, in ramping still of prior you’re is which focused month. exceptional is up year. add, them second a I’ll big going half. thing group business their good-looking October, have only Alba of us.

hotels their innings that from conversions that couple we’ve a of are of there done. other are recently still some earlier just So later ramp-up the versus in the

Alexander Goldfarb

you. Thank Scott, that’s helpful.

Operator

go next Cottage Please question ahead. with comes Haviland from Street Advisors. The Jason

Jason Haviland

morning. good you, Thank

guys or First had you. your you try in of a X:XX release AM all, release and thank quick asked We to release this morning, morning’s appreciated. information is earlier just that the

want you. just to So and say I thank acknowledge that

Drew Sims

You’re welcome.

Jason Haviland

two – And then first so questions.

environment. on First just rate interest the

the surprised environment. are surprised potentially or probably current with You

other to your the Or seem cuts rate mentioned be environment you this would way know up up and basically looking your I that now refinancing. believe you debt rate wrapped you less the So had you potential at Do opportunities? believe open you potentially new last interest opportunity? just have what

Drew Sims

going I guess year was rates that our last view were this up. time

lot debt out there’d or went say with of locked so much wanted we be we it’s could do couple have do a we a ago years, to right in our a more. could I is – be our maybe have as And sheet an years to for preferred something in we So everything to was view trying going XX now lock look certainty we months like. and of just in, there opportunity pretty of – balance downturn services with couple in maturities. could set. don’t that our we’re – to not but much I we a guess to of – and we don’t That’s as we’re guess terms if what plan the have our

have we now So certainty.

Jason Haviland

small – that very and opened else window a context. just And else or reasonable it may curious but like something you it Yes. drop I sounds that up they this if for I in if enough sense, something feel… makes – yes, was have was

Drew Sims

would so rate little floating we have Raleigh. from and Well, bit that. floating That debt, that we’ll Tampa debt – – be the rate a benefit of

Dave Folsom

Houston. And

Jason Haviland

in And Florida other demand my hear factors economy that’s And about do specifically you’ve you’ve very properties, the hyper-localized you in maybe some strong things in interesting that generally your the many Or have that properties? we CapEx and strong, down, participated generally view are just the lots manage. your you impacting just many a of local mentioned in, conventions and What’s of spending but to significant we some with you strength Will for of demand it that interested calls areas new U.S. the general is international it observe and of of travel. is about is demand is right. mentioned consistent? All driving your very your U.S. to economy with the business develop sort up. are described at there in issues a Or on trying maybe your but have – question have very is demand high, travel the any do as consistent economy mind you commentary, your is – properties? and disconnect

Drew Sims

why said. what have we We see believe the are exactly bias issues. economy a It’s the to maybe a very a But a most we towards same that’s the of you deal new of kind And weather local local that have we issues or is those just and little strong at time, bit. with upside driven by either product.

we’ve think hurricanes, had in a major can manage through job We’ve last if good of And our a weather the few that that street, three the have hotel huge then down So if Or and we we through work it some row, that’s can’t without issue. years managing we that becomes to a get any new in we kind done through. get really an just on years. I control, we event impact company. something

Jason Haviland

all That’s you. thank Okay, had. I

Operator

question next go from comes The [indiscernible] please ahead.

Unidentified Analyst

the I how got don’t have queue. I I know don’t in questions. any

Drew Sims

Thanks Rian. for today, us joining

Operator

Well, that our back I turn remarks. to Drew like over Executive Officer Sims, conference Mr. any the question-and-answer to would session. concludes for closing Chief

Drew Sims

you all you us October. in to forward look joining We reporting Thanks. Thank today. for to

Tony Domalski

November.

Drew Sims

November, All good everybody. November. right. day, excuse me, a Have

Operator

Thank The conference attending presentation. has today’s now you concluded. for

disconnect. now You may

Sotherly Hotels (SOHO) 6 Aug 192019 Q2 Earnings call transcript